WASHINGTON - The Pension Benefit Guaranty Corporation announced today that the guarantee limit for single-employer plans that fail in 2017 will be higher than the limit that applied for 2015 and 2016.
The following table shows the maximum annual guarantee limits for 2017 for sample ages and payment forms. Amounts for other ages are posted on a table on PBGC's website.
Single Life Annuity
Joint & 50% Survivor Annuity*
|*Assumes both spouses are the same age. Different amounts apply if that is not the case.|
The increase is not retroactive; payments to retirees whose plans terminated before 2017 will not change.
The guarantee in the separate program for multiemployer plans has not changed.
Single-Employer Plan Guarantee Limit
The guarantee limit is a cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guarantee limit. Whether that happens depends on the retiree's age and how much money was in the plan when it terminated.
The single-employer guarantee formula provides for:
- Periodic increases in the amount of the guarantee for plans terminating in different years.
- The annual changes are linked to increases in wage base information issued by the Social Security Administration.
- The guarantee limit for 2017 is 7.1% higher than the limit that applied for 2015 and 2016.
- Different limits based on the individual's age when they begin getting benefits from PBGC.
- For example, the limit is lower for people who begin getting benefits at a younger age reflecting the fact that they will receive more monthly pension checks over their expected lifetime.
- Conversely, the limit is higher for people who start receiving benefits later in life.
- Additional adjustments for retirees who choose a payment form that continues payments to a beneficiary after the retiree's death.
In most cases, the single-employer PBGC guarantee is larger than the pension earned by people in such plans. In fact, according to a 2006 study, almost 85% of retirees receiving PBGC benefits at that time received the full amount of their earned benefit. (For more information see the entry "Making Sense of the Maximum Insurance Benefit" in PBGC blog, Retirement Matters.)
The limits shown above generally apply for participants whose plan terminates in 2017. However, if a plan terminates in 2017 as a result of a bankruptcy that began in an earlier year, the limits in effect for that earlier year apply.
For more information about how the single-employer guarantee works, see PBGC's fact sheet Pension Guarantees.
Multiemployer Plan Guarantee Limit
The PBGC maximum guarantee for participants in multiemployer plans is also based on a formula prescribed by federal law. Unlike the single-employer formula, the multiemployer guarantee is not indexed (i.e., it remains the same from year to year) and does not vary based on the retiree's age or payment form. Unlike the single-employer formula, it varies based on the retiree's length of service. In addition, the multiemployer guarantee structure has two tiers, providing 100% coverage up to a certain level and 75% coverage up to a second level. For example: for a participant who retires with:
- 20 years of service, the current annual limit is 100% of the first $2,640 and 75% of the next $7,920 for a total guarantee of $8,580 per year.
- 35 years of service, the annual limit is 100% of the first $4,620 and 75% of the next $13,860 for a total guarantee of $15,015 per year.
The multiemployer guarantee limit has been in place since 2001.
PBGC protects the pension benefits of more than 40 million Americans in private-sector pension plans. The agency is directly responsible for paying the benefits of about 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars. Its operations are financed by insurance premiums, investment income, and with assets and recoveries from failed single-employer plans. For more information, visit PBGC.gov.